WallStreetFeds: Client-Specific Tokens as Investment Vehicles in Federated Learning

Abstract

Federated Learning (FL) is a collaborative machine learning paradigm which allows participants to collectively train a model while training data remains private. This paradigm is especially beneficial for sectors like finance, where data privacy, security and model performance are paramount. FL has been extensively studied in the years following its introduction, leading to, among others, better performing collaboration techniques, ways to defend against other clients trying to attack the model, and contribution assessment methods. An important element in for-profit Federated Learning is the development of incentive methods to determine the allocation and distribution of rewards for participants. While numerous methods for allocation have been proposed and thoroughly explored, distribution frameworks remain relatively understudied. In this paper, we propose a novel framework which introduces client-specific tokens as investment vehicles within the FL ecosystem. Our framework aims to address the limitations of existing incentive schemes by leveraging a decentralized finance (DeFi) platform and automated market makers (AMMs) to create a more flexible and scalable reward distribution system for participants, and a mechanism for third parties to invest in the federation learning process.